Thread by @_LukasFreund_

Interested in productivity (growth slowdown), hysteresis and the effects of the financial crisis? Then you should check out the paper "Intangible Investment and the Persistent Effect of Financial Crises on Output " by my @Cambridge_Uni colleague @RidderMaarten.
👇Summary
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@Cambridge_Uni @RidderMaarten Link: inet.econ.cam.ac.uk/working-paper-… or summary on voxeu.org/article/endoge…

CC: @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu #EconTwitter

@Cambridge_Uni @RidderMaarten @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu Motivation: Output growth recovery following financial crises typically "incomplete," i.e., no return to trend. Discussed, e.g., in Comin/Gertler (2006, AER) and Cerra/Saxena (2008, AER) => Does drop in productivity-enhancing investments during financial crises play a role? 2/n

@Cambridge_Uni @RidderMaarten @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu Methodology: paper draws on a a matched borrower-lender data set of US corporations and exploits fact that firms and banks tied through long-term relationships to obtain exogenous variation in firm-exposure to tight credit around GFC. 3/n

@Cambridge_Uni @RidderMaarten @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu Main finding: tight credit in the Global Financial Crisis reduced investments in productivity-enhancement => (IV reg) significantly slowed down output growth between 2010 and 2015. 4/n

@Cambridge_Uni @RidderMaarten @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu Headline figure (based on partial eqm aggregation exercise): GDP would be at least 3.2% higher today if productivity-enhancing investment intensity had remained at its pre-crisis level. 5/n

@Cambridge_Uni @RidderMaarten @Noahpinion @MESandbu @LHSummers @CambridgeINET @IncluProdu @productivityNW @MakronomMagazin @voxeu Conclusion: supportive evidence for endogenous growth hypothesis (cf. Verdoorn's law); substantial fraction of the recent slowdown in productivity is an endogenous effect of the GFC. 6/6

@Cambridge_Uni @RidderMaarten @ryanavent @M_C_Klein @bencasselman @jimtankersley
@bhgreeley @CardiffGarcia @KeineWunder @schieritz: You might also be very interested in this piece of research.